Hertler Market Signal Update #771 1/14/2017 1
Hertler Market Signal Update
#771 January 14, 2017
The SMI and EMC are long term bullish, short term bearish.
Sentiment indicators are still bearish.
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9/1/14 3/1/15 9/1/15 3/1/16
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S&P 500
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Smart Money Index (SMI)
___SMI 50-DMA
___SMI 200-DMA
S&P 500 vs Smart Money Index
The Smart Money Index over the long term displays an inverse relationship with the S&P
500. The SMI climbed to the 50-day moving average last week. The 200-day moving average has
turned down, and the 50-DMA is below the 200-DMA very bullish assuming the inverse
correlation still holds. The rise in the SMI is short term bearish.
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S&P 500
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LMC (Cumulative Late Market Component of SMI)
S&P 500 vs LMC
___LMC50-DMA
___LMC 200-DMA
The late market component (LMC) of the Smart Money Index was nearly unchanged last
week. The LMC has not correlated reliably with stock prices for a long time. But, for about a year
the LMC has more or less correlated with the S&P 500.
Hertler Market Signal Update #771 1/14/2017 2
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S&P 500
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EMC (Cumulative Early Market Component of SMI)
___EMC 200-DMA
____EMC 50-DMA
S&P 500 vs EMC
The EMC (early market component of the SMI) fell last week, which is short term bearish.
The 50-DMA has crossed above the 200-DMA, which is intermediate term bullish. Although in
theory the EMC is supposed to represent the dumb money the emotional traders it is
apparent that the EMC has been correlated well with the S&Pvery bullish for the intermediate
term.
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1/15/00 1/15/05 1/15/10 1/15/15
S&P 100
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Barrons Confidence Index
S&P 100 vs Barron's Confidence Index
___BCI 50-wk moving avg
Barron’s Confidence Index climbed to a new intermediate high at 76.9, and it remains
very bullish.
Hertler Market Signal Update #771 1/14/2017 3
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3/1/09 3/1/10 3/1/11 3/1/12 3/1/13 3/1/14 3/1/15 3/1/16 3/1/17
Russell 2000 Small Cap
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Ratio of Russell 2000 to DJIA
Small Caps vs Ratio of Russell 2000 Small Caps to DJIA
The small cap/DJIA ratio remained below its peak last week while the Russell 200 small
cap index is near its high. The recent strength in this ratio is bullish, but there is a bearish
divergence.
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3/1/09 3/1/10 3/1/11 3/1/12 3/1/13 3/1/14 3/1/15 3/1/16 3/1/17
NASDAQ COMP
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Ratio of NASDAQ Composite to S&P 500
NASDAQ Comp vs Ratio of NASDAQ Comp. to S&P 500
The ratio of the NASDAQ Composite to the S&P surged close to its earlier high as the
NASDAQ scored another new high. It is bullish.
Hertler Market Signal Update #771 1/14/2017 4
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3/1/08 3/1/10 3/1/12 3/1/14 3/1/16
S&P 500
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AAII Members Bullish Sentiment Oscillator (3-Wk Moving Avg.)
S&P 500 vs AAII Member 3-Week Bullish Sentiment Oscillator
The three-week bullish oscillator rose slightly last week. At its recent high it approached
earlier peaks and is still bearish.
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S&P 500
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AAII Bull-Bear
S&P 500 vs AAII Member Bulls Minus Bears
___3-wk MA
The AAII percent bulls minus percent bears reached a euphoric level where it spiked
very bearish. It slipped last week, and is below its recent peak.
Hertler Market Signal Update #771 1/14/2017 5
Euphoria
Panic
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3/1/09 3/1/10 3/1/11 3/1/12 3/1/13 3/1/14 3/1/15 3/1/16 3/1/17
S&P 500
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S&P 500 vs Citigroup Panic/Euphoria Model
Citigroup Panic/Euphoria Model
The Citigroup Panic/Euphoria Model (from Barron’s) rose to 0.22, and it is near the
Euphoria zone. Note that prior to the last market top, the Model remained in the euphoria zone
for 9 months and headed down long before the market topped. The Model bottomed on 2/4/2016.
It is still neutral, but trending toward bearish.
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3/1/09 3/1/10 3/1/11 3/1/12 3/1/13 3/1/14 3/1/15 3/1/16 3/1/17
NYSE Composite
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Fear Index: Product of VIXO and Total Put/Call
Ratio (50-Day Moving Average)
NYSE Composite vs Fear Index
___Fear 5-DMA
The Fear Index 50-day moving average is heading down from a lower level than the
preceding three peaks. The 5-DMA is low and falling showing fear. The 50-DMA is not nearly as
low as it was at recent market tops.
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3/1/08 3/1/10 3/1/12 3/1/14 3/1/16
DJIA
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IDV (Interday Volatility of DJIA, %) 10-Day Moving Avg.
DJIA vs Interday Volatility of DJIA
The 10-Day Interday Volatility remains very low bearish.
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The Smart Money Index is long term bullish assuming an inverse correlation to stock
prices, but short term bearish.
The EMC is bullish longer term, but short term bearish.
The AAII member bullish oscillator is bearish as is the difference between bulls and
bears.
The Citigroup Model is approaching the euphoric level.
The relative strength of the NASDAQ Composite is bullish.
The strength of small caps is bullish, but the relative strength is showing a large bearish
divergence.
The Fear Index is bearish.
The Interday Volatility Index is low and bearish.
Barron’s Confidence Index remains bullish.